The purchase of a home is typically the largest investment that a person makes. Because of the amount of money required to purchase a home, most home buyers do not have sufficient assets to purchase a home outright on a cash basis. In addition, buyers who have already purchased a home may wish to refinance their home. Therefore, potential homebuyers consult lenders such as banks, credit unions, mortgage companies, savings and loan institutions, state and local housing finance agencies, and so on, to obtain the finds necessary to purchase or refinance their homes. These lenders offer mortgage products to potential home buyers. The lenders who make (originate and fund) mortgage loans directly to home buyers comprise the “primary mortgage market.”
When a mortgage is made in the primary mortgage market, the lender can: (i) hold the loan as an investment in its portfolio, or (ii) sell the loan to investors in the “secondary mortgage market” (e.g., pension funds, insurance companies, securities dealers, financial institutions and various other investors) to replenish its supply of funds. The loan may be sold alone, or in packages of other similar loans, for cash or in exchange for mortgage backed securities which provide lenders with a liquid asset to hold or sell to the secondary market. By choosing to sell its mortgage loans to the secondary mortgage market for cash, or by selling the mortgage backed securities, lenders get a new supply of funds to make more home mortgage loans, thereby assuring home buyers a continual supply of mortgage credit.
Often, a seller and a purchaser enter into an agreement or agreements that define the types of loans the seller may sell to the purchaser. An agreement may include terms that permit a seller to provide loans according to terms that differ from the standard/default terms by which the purchaser typically purchases loans, referred to as a variance transaction. Such variance transactions may have an impact on the delivery and/or pricing of a loan. For example, an agreed upon variance may otherwise cause an error when a loan, including the variance, is delivered to the purchaser since it varies from what the purchase was expecting would be delivered.
Further, a seller and purchaser may enter into an agreement where a seller seeks to negotiate a higher selling price for a loan by offering assets of the seller as a recourse. A recourse is the right to demand payment from the endorser of a commercial paper when the first party liable fails to pay. Accordingly, in the event of a default of a loan, the purchaser has a recourse to collect against the assets of the seller. Such an agreement may be referred to as a recourse transaction.
Entering into a variance or recourse transaction can increase the risk to the purchaser. Examples of risk can include a borrower with a lower credit score, a larger loan than previously discussed, a seller having a low credit rating or highly leveraged assets, etc. Accordingly, a purchaser may require an approval process to analyze the transaction prior to entering the variance or recourse transaction.
During the approval process, the purchaser may analyze the transaction and/or the seller to determine whether to accept the additional risk. Traditionally, the analysis and approval process involves numerous communications between parties both within the purchaser and with the seller. Based on the numerous communications, the processing of the loan may be unduly delayed, thereby delaying funding of the loan by the purchaser. Further, the consistency in approving variances and recourses is highly variable because of the number of parties involved.
Accordingly, there exists a need for a system and method for facilitating the approval of a variance or recourse transaction. Further, there exists such a need wherein the system and method is configured to facilitate consistency in the approval of variance and recourse transactions. Yet further, there is such a need where the system or method is performed as a step in a system or method for generating a recourse or variance agreement.